Statoil Won’t Back Extractive Rule Lawsuit

Norwegian state-controlled oil producer Statoil distanced itself from a lawsuit seeking to block rules mandating oil and mining companies to report payments they make to governments in the course of doing business.

Reuters

The suit, filed by the American Petroleum Institute and U.S. Chamber of Commerce, challenged rules approved by the Securities and Exchange Commission as required by Section 1504 of the Dodd-Frank Act. A hearing date on the lawsuit hasn’t been scheduled.

“We have not supported the lawsuit and we have explained our reasons to regulators and within API and will continue to do so,” Bard Pedersen, a Statoil spokesman, told Corruption Currents.

The business groups say in their lawsuit, among other things, the rules violate the First Amendment free-speech rights of companies if they are forced to disclose public payments. Resources companies have been fighting the provision since before it became law.

“Statoil has not supported the lawsuit initiated by API; in fact, Statoil explicitly withheld support for the litigation,” the company wrote in a Feb. 5 letter signed by Baiba A. Rubesa, vice president for corporate social responsibility, to human rights organization Global Witness.

The oil company began in 2007 to voluntarily disclose the payments it makes to governments, it said in the letter. Statoil makes the disclosures on a country-by-country basis, and said it will continue to do so regardless of the results of the lawsuit. “Statoil is a strong supporter of transparency and we have done country-by -country reporting for several years,” Pedersen said.

API says there are better ways to improve reporting than the rules put forth in the law. “We’ve been working hard to increase transparency for a decade, and we can accomplish our goals of disclosure in a much better way without losing our global competitive edge,” said Carlton Carroll, an API spokesman.

Global Witness and other activist organizations have pressured Statoil, in which the Norwegian government owns a 67% stake, to speak out publicly against the lawsuit. The company is a member of the American Petroleum Institute.

“We are encouraged to see a major oil company with global operations in such places as Angola, China and the U.S. refusing to support a lawsuit based on unsubstantiated claims,” said Ian Gary, senior policy manager of Oxfam America’s oil, gas and mining program, in a statement. Oxfam America is intervening in the lawsuit.

Under the rule, approved in August 2012, oil, gas and mining companies must disclose in their SEC filings payments of more than $100,000 to foreign governments for things such as licenses or royalties. The rules don’t contain exemptions for reporting “confidential or competitively sensitive information” or exemptions for instances in which reporting the payments might violate foreign laws.

API, the Chamber and the two other plaintiffs contend the SEC has exceeded the scope of its authority by passing the rules. They say coming into compliance with the rule will be very costly, and the SEC failed to consider the cost of the regulation, as is required by law.

The SEC has estimated the initial cost of complying with 1504 at between $44 million and $1 billion, and the cost for continuing compliance at between $200 million and $400 million. In their lawsuit, the business groups say it will cost $14 billion to comply with the rule.

In its letter to Global Witness, Statoil said the cost of reporting “should be reasonable and not outweigh the benefits.” While the company supports transparency, Pedersen said it shares concerns the rule contains “very detailed reporting requirements that may include some challenges.”

Write to Ben DiPietro at ben.dipietro@dowjones.com, and follow him on Twitter @BenDiPietro1.

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